COMMENTARY | During debates over the federal budget, including the recent debt ceiling debacle, conservative defenders of maintaining tax cuts for wealthy individuals have frequently groused that nearly half of all American working families pay no taxes.
This statement is true, on surface, but there are several problems in the manner in which it is presented.
First, we should take note of a clarification offered by Donald Marron, director of the Urban-Brookings Tax Policy Center. Marron wrote, "The true fact -- about half of Americans do not pay federal income taxes -- often gets transmogrified in public discourse into the decidedly untrue claim that half of Americans pay no taxes. That simply isn't so. There are many other taxes in our fair land, including payroll taxes, excise taxes, sales taxes, state income taxes, and property taxes. Most people who don't pay federal income taxes still encounter some of these other taxes."
A second problem is that conservatives portray the lack of tax payments as yet another symbol of excessive and expensive liberal policy, when in fact conservatives were instrumental.
A report from the Marguuerite Casey Foundation is among many sources that tell the whole historical story. Daniel Patrick Moynihan, a socialist and eventual U.S. senator, in 1969 suggested to President Nixon the concept of a "negative income tax" through which the working poor would receive tax rebates. The business sector supported this idea as an alternative to ongoing pressure for a higher minimum wage. Nixon dubbed Moynihan's idea as the Family Assistance Plan, but he had trouble getting approval from Congress until he tweaked it into the Earned Income Tax Credit, which eventually was passed after President Ford took over during the post-impeachment year of 1975.
The prime beneficiaries of the Earned Income Tax Credit have household incomes of $15,000 or less, although families making up to $40,000 can receive smaller benefits. Recipients often work as nurse aides, big-box store employees, or in other minimum wage jobs with hours that intentionally are restricted to below 40 weekly hours so that employers may refrain from offering health insurance.
In addition, with a bipartisan political focus on "family values," families receive child credits and child care credits that preclude them from paying federal income taxes, or that at least sharply reduce their payments. Middle-income folks qualify along with lower-income household heads.
President Reagan was a big fan of tax credits for the working poor, viewing them as incentives to say on the job. President Clinton, he who carried out his pledge to "end welfare as we know it," declared in 1993 that any American who was willing to work 40 hours a week should be rewarded with resources to keep their families out of poverty, or at least as things turned out, closer to the poverty income cap.
But in the midst of today's anti-tax fervor, few Americans, especially the tea partiers, seem aware of this history in which their hero, Ronald Reagan, played an integral part.
Beyond that, some people simply are ignorant. Clint Stretch, a policy expert for Deloite Taxes, reports that some critics simply compare the gross pay to the take-home pay on their weekly stubs and calculate the difference as their federal income tax, apparently failing to realize that other deductions may range from 401(k) investments to employee health care premiums to state and local taxes.
I don't know about you, but to me, that's pretty stupid. These are some of the same folks who complain that today's kids are poorly educated. These are some of the same folks who complain that because of liberal policies, or even because of President Obama, half of Americans aren't paying federal income taxes. How wrong, how sneeringly and selfishly wrong, can they possibly be?
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